In truth, it was not difficult for agricultural commodities
to rise on Wednesday.
Commodities overall enjoyed a firm day, with the CRB index
rising 1.0%, as disappointment at data showing a small drop in US economic
output in the fourth quarter of 2012 was countered by a supportive stance from
the Federal Reserve.
The US central bank said that monetary policy in the world's
largest economy will remain "highly accommodative", noting a relatively high unemployment
The dollar, which
stands to be debased by ultra-easy US monetary policy, fell 0.4%, improving the
affordability of dollar-denominated exports, such as many crops, to buyers in
Even so, grains and oilseeds outperformed.
And this despite what looked like a major setback, when the
US revealed that its ethanol plants, which use corn as their feedstock, had cut production to 770,000 barrels per day last week, down 22,000 barrels a day from
the week before, and the weakest figure since records began in 2010.
In another sign of a slack market, US ethanol inventories
But the output figure was seen as marking something of
a nadir, with ethanol margins improving, and the increasing expense of the renewable
identification numbers (Rins) which blenders can buy as a paper alternative to
meeting mandated activity through physical supplies.
20% becomes 25%
"Weekly ethanol production numbers were weak today," Darrell
Holaday at Country Futures said.
"But many feel the number will increase in the next few
weeks as ethanol margins improve."
After all, "we are starting to see a decrease in Brazilian
imports of ethanol".
And late news indicated one factor in that dynamic, with Edison
Lobao, Brazil's energy minister, revealing that the country will on May 1 raise
the ethanol content of regular gasoline blends to 25%, from a current level of
20%, a month earlier than many commentators had been suggesting.
Investors overlooked the US ethanol data in favour of the
bull point of growing concerns over South American weather.
"The weather leans positive, with a drier tone to
Argentina in the on-to-four day and 100-to-15 day forecasts prompting more
analysts to trim Argentina corn and soybean production forecasts," Richard
Feltes at broker RJ O'Brien said.
Lanworth on Wednesday reduced its estimate for Argentina's dryness-test
corn crop by 400,000 tonnes to 25.6m tonnes, although it offset this downgrade
with a 300,000-tonne upgrade to 75.8m tonnes in its forecast for the Brazilian
And bigger cuts may be in the pipeline, US Commodities
"If weekend rains fail to develop, the Argentina corn crop
could drop well below the 28m tonnes that the US Department of Agriculture has
predicted, with some estimates in the 22m-25m tonne range," the broker said.
Queue at port
Meanwhile, in more northern areas of Brazil, too much rain
is proving an issue.
"The Brazilian soybean harvest continues to be delayed by
3-5% behind normal as rains in Mato Grosso keep harvest on hold," US
And that means delayed supplies to Brazil's ports, where 126
vessels are scheduled to load 6.2m tonnes of soybeans and corn, according to Unimar
Agenciamentos Maritimos, a shipping agency.
A year ago, the figure was 72 ships and 2.8m tonnes, and in
2011, 47 vessels expecting to ship 1.5m tonnes of the two crops.
'No available supply'
In fact, Country Futures' Darrell Holaday said that "the
concerns in South America today centre around the logistics problems in Brazil.
"A large number of ships are waiting for soybeans at ports
and have been waiting a long time.
"Of course, those ships are supposed to be on their way to
China. This may cause some optional origin contracts to switch back to the US
and the US does not have any available supply."
The USDA announced the sale of 175,000 tonnes of US
soybeans to China, although for 2013-14 delivery.
The impact was to send Chicago soybean futures, for March delivery, up 1.9% to $14.78 ¾ a bushel
at the close, the best finish in more than a month.
The extent of the gains was helped by technical factors, with
the contract securing its 75-day moving average, closed over on Tuesday for the
first time since September, by a margin, and coming less than 2 cents from ending
above its 100-day moving average for the first time since October.
Investors with short positions, "who did not believe that
technical resistance would be broken are now covering their position adding to
the strength", Mr Holaday said.
That went for corn
too, which closed up 1.5% at $7.40 ¼ a bushel despite the poor ethanol data,
actually securing its 100-day moving average, for the first time in three
months, and its 75-day line, also for the first time since October.
'Wheat is a laggard'
Wheat also gained
in Chicago if, with a 1.3% rise to $7.87 a bushel, not by quite as much as its peers,
feeling a little weight from forecasts for rain for dry areas, where winter
wheat seedlings are under threat once dormancy breaks.
"Wheat is a laggard and reluctant follower with trade
hesitant to jump on board with rains in the forecast for the southern plains,"
Benson Quinn Commodities said.
"Beneficial rains fell over large part of the hard red
winter wheat belt within the past 24 hours and more is in the 10-15 day outlook,"
the broker added.
Still, there appears plenty of import demand about, with
Syria purchasing 100,000 tonnes, probably from the Black Sea, and looking like
more will be needed, given the poor prospects for this year's crop too, after
unrest sent output tumbling last year.
The UK raised its forecast for wheat imports in 2012-13 to nearly 2.2m tonnes, noting that high prices, and a poor crop last year, had
not stemmed consumption.
Korea's Major Feedmill Group bought 55,000 tonnes of feed
wheat, potentially from India, for May arrival through a private deal.
And this following Algeria's purchase of 500,000-600,000
tonnes of durum wheat, mainly from Canada and the US.
US wheat is "even calculating into Russian ports", FCStone
said, following the growing talk of Russian import needs too.
"Russian wheat and flour prices are rising markedly to
increase the chatter of buy-backs of spring sales, or else additional imports
beyond that which the Kazaks are supplying."
Paris wheat for March managed only a 0.2% gain to E248.00 a
tonne, with its trade competitiveness eroded by a stronger euro, which
Paris-based Agritel said was "penalising our exports".
London wheat for May didn't manage any gains at all, easing
0.3% to £215.35 a tonne.
'Worried about a correction'
Among soft commodities, New York raw sugar for March gained 1.8% to 18.71 cents a pound, boosted by
short-covering encouraged by talk of imports heading for China, which had been
thought largely out of the buying game following a recovery in domestic output.
Furthermore, Brazil's move to boost use of ethanol and a
lift on Tuesday to wholesale prices of gasoline also underpinned sugar, which competes
with the biofuel for cane in the South American country.
"The tightening prompt cash physical, the Brazilian
real/dollar exchange rate movements and the colossal net short still
potentially left to cover has some worried about a correction above 19 cents a
pound," Thomas Kujawa at Sucden Financial said.
Arabica vs robusta
Coffee's moves reflected
a rebalancing of the Rogers International commodity index, which is cutting out
arabica in favour of a 2% weighting in robusta, the beans traded in London.
Robusta coffee for March closed up 1.7% at $1,968 a tonne,
while New York arabica beans for March fell 1.4% to 147.70 cents a pound.
The differing fates of arabica and robusta inventories were
also in play.
"While London continues to hold due to low certified stocks figures
and a lack of available robusta, New York on the other hand has plenty of
certified stocks, which climbing on a weekly basis," Sucden said.
"There is reported to be lots of arabica around and despite
news of fungus affecting Central American stocks, the prices continue to fall."